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C A S E S These cases illustrate the range of services that have been provided by Presidential Services and affiliated firms during more than 30 years of service. Each case presents at least one major element of our service. Each situation required a variety of support services, but, we focus attention on the most important one. The next two paragraphs have been included by way of background.
"What is a Private Investment Banker . . .?" (the current role of Rockford Equities Ltd.) We often hear that question. "What do we really do?" We provide transaction assistance for our clients including acquisition, sale, financings and mergers. To provide management services we create teams to complete carefully defined assignments. We strengthen a CEO's performance with experienced, capable personnel. Most important, we only work with trustees or directors, owners and CEOs! We also limit our work to small to mid-size business, private liberal arts colleges, small government units and special purpose organizations and associations.
The President's Counsel(sm) Lumber City, in Melrose Park, IL, grew out of the Joseph family's fifty years serving builders. By the mid 1970s the firm hung suspended between being a builder's supply house and a home-center retailer. Each required a staff and capital but neither contributed much profit or return on the family's capital. For seven years, The President's Counsel(sm) helped Lumber City's management cut costs, initiated a strategic plan, reduced inventory, established sales training, refinanced operations and redistributed the company's ownership to younger family members.
In December 1986, the last family manager of A. E. Bogott and Sons, Inc. passed away. The company's future fell into the hands of a widow, an attorney and a long time employee. The firm needed new ownership and leadership. We found acceptable buyers in December 1987 but the transaction required public sector financing blended with a bank loan to complete the purchase and redevelop the company. We requested a Community Development Assistance Program (CDAP) grant from the State of Illinois. The Mayor of Sterling (IL) and the Sterling Industrial Development Commission assisted us. The State provided a $110,000 (CDAP) grant to be loaned by the City to the buyers. The City also loaned the buyers $90,000 from its revolving fund for business development. The low cost financing (less than 6% interest) helps fund redevelopment of the company. For its assistance, the City of Sterling will earn interest on its revolving fund. The City also adds an additional $110,000 to the revolving fund through the CDAP. (Update: The Buyers recently (1998) sold the firm as a solid going concern.) Offering a "Market Worn" Division Over the years, Whittaker Corporation had grown from a smallish California, aerospace firm into a diversified international firm. Management's attention turned to medicine and health care for continuing growth. We represented the founders of Lypho-Med and offered their company to Whittaker's Life Sciences Division. The divisional president did not recommend the acquisition. Still, he and a corporate director spoke highly of the attention and quality of service that they had received as a prospective buyer. They encouraged the corporate president to consider working with us when they decided to sell one of their operating companies. Joseph Alibrandi, Whittaker's president, summoned our senior acquisition team to California for a closed-door meeting. Our conference resulted in an exclusive assignment. Whittaker needed an outside team to evaluate their Crown Aluminum subsidiary in North Carolina. It seems that Chamberlain Manufacturing (Elmhurst, IL) had contracted to buy the firm, but found a $4 Million inventory short-fall. This unpleasant surprise arose after a certified audit prepared by Arthur Anderson. Everyone believed that Crown Aluminum was a loser. Our five person team found the firm to be profitable, well positioned in aluminum reclamation and soundly managed. We completed an acquisition opportunity notebook and presented Crown Aluminum to a list of foreign firms. Whittaker sold Crown Aluminum based on our evaluation and presentation.
All-round the world the Y's Men's service organization of the YMCA showed life and vigor. In the United States, the Y's Men appeared to have seen better days. Every vital sign in the U.S. branch showed deterioration. U.S. Y's Men no longer led the international organization, they trailed the leadership of other nation's Y's Men. Leadership, operating strategies, policies and control rested in the international office in Oakbrook, IL. We embarked on a two year, self-study and strategic planning activity. As a result, the organization moved from a colonizing, American design to a modern, international design. The changes resulted in new growth and development in the U.S.A.. Other countries' leaders rapidly accepted leadership responsibility for worldwide growth and development. Y's Men/U.S.A. began to recover its leadership role by repairing and motivating its local chapters.
College Advancement Private higher education finds its support and champions in the private sector of business, the church and the professions. Most private liberal arts colleges came about from the commitment of a religious or fraternal organization. Often these colleges lose their way as administrative staffs, board leadership and sponsor's priorities change. When we met its president, Lakeland College (WI) was experiencing a declining enrollment and a concurrent reduction in gift income. "The ability to attract students seemed at the heart of the decline," reported our Preliminary Institutional Analysis Team. "New strategies and programming must be applied to recruitment." By applying a simple marketing strategy, the enrollment changed from a cumulative, declining trend of 18 percent to 22 percent growth in about 60 days. College dormitories soon filled with exactly the right type of students. The church and the trustees began raising the enough money to assure a viable future for the college. They found fund raising much easier. Years later, the college remains stable while some sister institutions wane. Loan Recovery In June 1987, the City of Sterling and the Sterling Industrial Development Commission held little hope of recovering a $300,000 development loan. The City had granted the loan to attract a new company to town. The company, which displayed enormous potential when the commission first examined it, had devoured itself in growth. No one knew what action to take. A Preliminary Problem Assessment showed that the company could repay its City loan. First, its bank debt must be adjusted and selected assets must be sold. The process required almost full-time attention of management and a Presidential Services(sm) Team leader for six months. The work paid off. The sale of a patented product resulted in the recovery of the CDAP/City of Sterling loan. The City now had over $300,000 in its revolving fund and could invest in the future of other companies. The revolving fund could create more jobs in Sterling.
Few businesses present more of a financing challenge than small market and suburban radio. When Gamel Broadcasting became a President's Counsel(sm) client, the station lacked a business plan. Management needed a defined strategy to overcome the station's consistent loss of money. The station also had a principal investor who wanted out and a $300,000 Seller's Note due in a few months. The station's future seemed bleak! We helped prepare a budget (which yielded profit and cash flow) and a business plan. Then we tutored management on business controls, formed a more effective board, helped management secure an equity infusion and found a willing lender. These basic changes made the difference between continuing and closing the business. The complete process took over three years and didn't always move forward without interruption. Today, the station stands on the edge of another stage of development. The managing family, who owned a controlling interest in the station, sold their interest to the second largest investor. This phase should be easier for the investor because we helped find an experienced, successful management team to operate the station.
Managing creatively "We've always done it this way!" You've heard this well-worn, idea stopper as often as we have. Presidential Services(sm) professionals tend not to pay any attention to comments like this. Here are two illustrations of what can happen when they don't. First Case: Glenn Lau has been described by many as a mountain man, though he grew up on the marshes south of Toledo (OH). Glenn distinguished himself as an outdoorsman, fisherman and outdoor photographer. Then he turned to creating outdoor programs on film and for television. He attracted sizable national TV audiences with The Sports Afield Television Series and western regional TV dominance with The Coors' Western Outdoorsman. Glenn found himself caught amidst extremely high costs for advertising sales and air time, combined with runaway syndicator's expenses and production costs. A special team designed and set up a "Syndicated Producer's Management Program." Within six months, we had cut more than $1.2 Million from sales and administrative expenditures. It did not matter. For Glen Lau Productions, it proved to be too little, too late. The production company slipped into a Federal reorganization. The management model attracted national attention and six other producers engaged the team to adapt the use of the model for their productions. Second Case: Is a condominium-community, management assignment a real estate management assignment? Our real estate group said, "No." They believed that condominium management most closely paralleled municipal management. Many villages face complicated problems with their streets, landscaping, snow removal, physical repairs, sewers, recreational facilities, governance, administration and politics. Typical condominium communities of 250 or more residences face greater complications. To meet the need of condo association boards, our management team created a "small village management model." Our management team could provide all the support required by the board of directors to manage the community. We created a training seminar called "Effective Condominium Management" to help them prepare for this unfamiliar role in governance. We gave the idea a two-year trial run by managing ten communities. Then a California firm bought the rights to the model intending to use it to differentiate their firm from competitors in California. (We have found that every management situation or issue should be addressed with fresh insight. Stale ideas and worn management methods fall short in productivity, effectiveness and sound fiscal management. Who, today, can afford to fall short of their plan and expect to continue in business? What college or non-profit organization can afford to use outdated strategies or methods? Who can muster all the resources needed?)
In 1983, Dan Rostenkowski's committee had taken aim at Industrial Revenue and Development Bonds. The House Ways and Means Committee pressed for serious and sweeping reform in bond requirements and taxation. Accountants, lawyers and bond houses all said that it would be impossible to complete a new IDB in the last half 1983. One of our Sister companies needed a $1 Million IDB for a project in Rockford (IL). If it did not close before the last day of the business year, it might not be possible to close the IDB. Some believed the bond would not close. Rockford Mayor John McNamara's office assisted us. One senior corporate executive, a highly skilled attorney and an affiliated broker/dealer completed the bond, received approval and raised the funds. The bond could be funded on the final day of the year. From beginning to end, the process had taken less than 45 days.
Sale of a Business When Mr. Friedler died, he left his widow and son with United Audio Stores. The stores operated on the margin. Mrs. Friedler did not want to operate the business and her son was an investment banker. If the company was to attract a buyer, it would have to be carefully valued, packaged and presented. Any completed transaction would require seller financing, but we didn't want unnecessary risk for Mrs. Friedler. An enterprising store manager, from another audio chain, emerged as a prospective buyer. By skillfully crafting the transaction and arranging a modest loan, we completed the sale. Mrs. Friedler had a satisfactory sale at a fair price. Her son drove away in new Rolls Royce, his incentive for closing the sale. The buyer has gone on to develop an area-wide chain of audio stores for Chicago, well positioned and growing.
The social documentary Scared Straight, told of teenagers in New Jersey who learned the truth about incarceration from convicts at Rahway Prison. The documentary commanded audiences larger than Dallas, then prime time's number one hit. Dave Bell, an experienced TV producer from Hollywood, by way of Ohio and New York, helped with the documentary's production and release. He and his excellent staff realized that television stations would accept a series of similar documentaries. Dave Bell Associates could fulfill that need if they raised the required, front-end capital. Our idea, stage "An Evening with Dave Bell" in Chicago. During the evening, a select group of guests would meet Dave Bell. They would screen his work and learn about his opportunity to create and air documentaries on critical social issues. Most of the invited guests came and Dave impressed them. Several offered Dave financial assistance. Working with legal counsel in Los Angeles and Chicago, we created limited partnership (Super Docs I) for these investors. The LP funded Dave Bell's creation and syndication of three documentaries. "An Evening with Dave Bell" broke new ground. For the first time a Hollywood producer met Midwesterners for the sole purpose of sharing ideas and getting acquainted. It worked and others have copied our idea.
Businesses in trouble come in a variety of sizes, shapes and conditions. Most display some basic form of miscalculation by their owner or president. The Travel Headquarters Group (THQ) of travel agencies sold over $15 Million of travel services to its clients. THQ's $1.2 Million in operating revenue should have been enough to meet the rapidly changing conditions the agency encountered following airline deregulation. It wasn't. After nearly a year of refinancing, cost cutting and reorganizing, the business seemed ready to collapse. We employed a creative strategy, which allowed another agency to assume management of the "book of business." That firm paid Travel Headquarter's creditors a royalty. We created, developed, negotiated, refined and carried out the plan. By quickly completing an agreement with a similar sized agency, THQ customers continued to be served by THQ personnel working for the new managing agency. The remainder of THQ's business could be wound down in an efficient manner.
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